Deficiency of fertilizers on the domestic market jeopardizes prospects for the harvest of MY 2017/18

10:49 | ProAgro

According to ProAgro, in the current marketing year, the total acreage under crops will be 1.6% higher than in the previous season and will reach 23.77 million ha.

At the same time, despite such positive developments for the industry as the expansion of sown areas and relatively high yields of the key crops, a significant factor in gross harvests reduction in MY 2017/18 is the inadequacy of fertilizer supply for the domestic market.

As reported by key market participants, most likely, the increase in the deficit of nitrogen fertilizers will continue. According to the report of the Federation of Employers of Ukraine and the Union of Chemists of Ukraine about 34% of the demand of Ukrainian farmers in nitrogen fertilizers may not be covered this year.

Among the basic reasons for this situation is the high price of natural gas, which is an important component of raw materials for such production. It is worth to clarify that the imperfection of the mechanism for the regulation of the internal natural gas market leads to the fact that the real costs of such products for national producers may exceed the purchase price by 1.5 - 2 times due to the high cost of supplies and services from Naftogaz Ukraine.

In addition, the high level of competition from imported products (which could have been regulated through the introduction of import duties) continues to have a negative impact on the activities of core producers and the fact that due to the geographical location of many large enterprises in the industry (in the Donetsk and Lugansk regions), their production is forced to experience interruptions with electricity, raw materials or even completely stop of their manufacture.

Given that the lack of fertilizers is fixed during the active spring field work, this fact can further limit the yield potential as well as might be reflected in the growth of domestic prices, the decrease in the volume of agricultural exports and, due to the reduction in the inflow of foreign exchange earnings, negatively affect the level of macroeconomic stability of the state as a whole.